Mortgage Borrowing Power Calculator
Your Financial Details
Two applicants means a couple applying together. The HEM estimate is set for one or two adults to match.
Salary or wages. Tax is worked out at 2026-27 resident rates plus the 2% Medicare levy.
Rent or other regular income, before tax. Counted at 80%, the share industry guides commonly cite for rental income, and split evenly between applicants for tax.
Regional households spend slightly less in the ABS data, so the HEM estimate is a little lower.
Everyday costs lenders compare with HEM: groceries, utilities, phone and internet, transport, home, contents and car insurance, childcare, clothing, medical costs and entertainment. Leave out rent and loan repayments, and put the costs lenders add on top in the next box. Leave at $0 to use the HEM estimate; the calculator uses whichever is higher.
Car, personal and other home loan repayments, buy now pay later and HELP repayments, plus costs lenders add on top of HEM: private school fees, child support, private health and life insurance, and land tax. Enter credit cards below, not here.
Limits, not balances. Counted as 3% of the limit a month, the example rate in APRA's practice guide APG 223; some lenders use 3.8%.
Added to the loan for your purchase budget. It does not change what you can borrow.
Default 6.2%: the RBA's average rate on new owner-occupier variable loans (statistical table F6). Repayments are tested at 9.2%, your rate plus 3 percentage points.
Summary
Stamp duty, any lenders mortgage insurance and other buying costs come out of the deposit first. Estimate them with the upfront buying costs calculator.
Key Metrics
On the lower figure of $513,000.
How the Estimate Is Worked Out
Monthly, for the lower figure.
Our HEM estimate for your household is $1,770 to $2,250 a month. It is a Your Finance Guide estimate from ABS data, not the licensed Melbourne Institute table. Check it in the HEM calculator or read how HEM works. The higher figure uses $1,770 a month for living expenses (HEM estimate, low end), leaving $4,687.
Remember: An indicative estimate, not a lender assessment. Lenders shade some income, count HECS and other debts their own way, use their own expense benchmarks and may limit high debt-to-income loans, so a lender may offer more or less.
Want a lender's figure, not a range?
A licensed broker can test your numbers against lenders' own serviceability policies, including how each treats your expenses, card limits and any HELP debt.
How this calculator works
It follows the general way Australian lenders assess serviceability. Each applicant's after-tax income, less living expenses and existing commitments, leaves a monthly surplus. The estimate is the largest principal and interest loan over your term whose repayment at the test rate fits inside that surplus, rounded down to the nearest $1,000.
- Tax. 2026-27 ATO resident rates (nil to $18,200, then 15%, 30%, 37% and 45%), the low income tax offset and the 2% Medicare levy, for each applicant separately.
- Living expenses. The higher of what you enter and a HEM estimate for your household size, income and location. Our HEM figures are a Your Finance Guide estimate from ABS Household Expenditure Survey 2015-16 data, re-priced to June quarter 2026 (ABS Consumer Price Index), following the Melbourne Institute's published definition and ASIC's description of HEM in Regulatory Guide 209. They are not the licensed Melbourne Institute table, which lenders buy by subscription and which is not published. The lower borrowing figure uses the high end of our estimate and the higher figure the low end. The HEM calculator shows the estimate for any household, and the HEM guide explains what it covers.
- Buffer. Repayments are tested at your rate plus 3 percentage points, the serviceability buffer APRA kept in place in its 28 May 2026 statement on macroprudential settings.
- Default rate. 6.2%, the RBA's average rate on new owner-occupier variable loans (statistical table F6). Change it to the rate you have been quoted.
- Credit cards. 3% of the total limit a month, whether or not you carry a balance: the example rate in APRA's practice guide APG 223. Some lenders use more; Macquarie's published credit guidelines (version 14.1, updated 10 September 2026) use 3.8%, which turns a $10,000 limit into $380 a month instead of $300.
- Other income. Counted at 80%, the share industry guides commonly cite for rental income, and split evenly between applicants for tax.
- Debt-to-income. The new loan divided by gross household income, flagged at 6 or more because that is the line in APRA's debt-to-income limit.
What it leaves out: it does not work out HELP repayments (add yours to the commitments box), shade overtime, bonus, commission or self-employed income, apply the buffer to your existing debts (APG 223 expects banks to), or add lender floor rates and expense margins, and it does not cover interest-only or investment loans. Any of these can move a lender's figure away from this one. Because it adds no lender margin on top of the HEM estimate, treat the lower figure as your planning number.
Sources, checked 8 October 2026
- ATO: Tax rates, Australian resident. 2026-27 resident rates (nil to $18,200, then 15%, 30%, 37% and 45%) plus the 2% Medicare levy, and the low income tax offset.
- APRA: macroprudential policy settings (28 May 2026). Mortgage serviceability buffer kept at 3 percentage points; banks may write up to 20% of new owner-occupier and investor lending at a debt-to-income ratio of 6 or more.
- RBA statistical table F6, Housing lending rates. Average rate on new owner-occupier variable loans funded in July 2026: 6.2% a year (published 7 September 2026). The RBA has since raised the cash rate by 0.25 points to 4.60%, effective 30 September 2026, so use the rate you have been quoted if a lender has passed that on.
- APRA practice guide APG 223, Residential Mortgage Lending. Banks typically use HEM or the Henderson Poverty Index and should use the greater of that and declared expenses; 3% a month on card limits as an example; buffers applied to existing debts as well as the new loan.
- Melbourne Institute, Household Expenditure Measure; ASIC Regulatory Guide 209; ABS Household Expenditure Survey 2015-16 and Consumer Price Index. The definition of HEM, what it includes and leaves out, and the spending data and price indexes behind our estimate.
- Macquarie, Residential Home Loans Credit Guidelines, version 14.1 (last updated 10 September 2026). Card limits at 45.6% a year (3.8% a month); its own debt-to-income cap of eight times.
How Lenders Calculate Your Borrowing Power
Understanding the assessment process helps you prepare and potentially increase your borrowing capacity.
1. Assess Income
Lenders start from your after-tax income. Salary counts in full; rental, overtime, bonus and other variable income is often counted at a reduced share, and self-employed income is usually assessed from recent tax returns.
2. Calculate Expenses
Living expenses are the higher of what you declare and a benchmark such as the Household Expenditure Measure (HEM) for your household. Costs HEM leaves out, such as private school fees, child support and private health insurance, are added on top.
3. Apply Buffer Rate
Repayments are tested at the loan rate plus a buffer of at least 3 percentage points, which APRA kept in its 28 May 2026 statement. At 6.2%, the test rate is 9.2%.
4. Determine Capacity
Income less living expenses and existing commitments, including an allowance for credit card limits, leaves a monthly surplus. The largest loan whose repayment at the test rate fits in that surplus is the maximum.
8 Ways to Increase Your Borrowing Power
Close unused credit cards and reduce limits
Lenders count the limit, not the balance. At 3% a month a $10,000 limit counts as $300 a month, which takes about $37,000 off a single $100,000 earner's lower figure at 6.2%. Lenders that use 3.8% count it as $380.
Pay off existing debts before applying
Car loans, personal loans and buy now pay later repayments come straight off your monthly surplus. At a 9.2% test rate over 30 years, each $100 a month of repayments reduces the estimate by about $12,200.
Reduce discretionary spending
It helps only if your declared expenses are above the HEM benchmark; below it, the lender uses the benchmark anyway. Lenders check declared spending against your statements: CommBank's application page (checked 8 October 2026) asks for the last three months, or six if you work casually, unless your salary is paid into a CommBank account.
Add a co-borrower
A second income adds to the surplus, but the living-cost benchmark for two adults is higher than for one, so it does not double the figure: one applicant on $75,000 comes out at $371,000 to $421,000 here, and two on $75,000 each at $772,000 to $869,000. A family guarantee can cover a deposit shortfall but adds no income, so it helps the deposit, not serviceability.
Choose a longer loan term
A 30-year term has lower repayments than a 25-year one, so more loan fits the same surplus: for a single $100,000 earner the lower figure is $513,000 over 30 years and $493,000 over 25. You can still make extra repayments later.
Declare all income sources
Rent, regular overtime, bonuses and dividends can count, though lenders shade variable income and each does it differently. This calculator counts other income at 80%: $20,000 a year of rent moves a single $100,000 earner from $513,000 to $572,000 to $603,000 to $667,000.
Save a larger deposit
A deposit does not change what you can borrow, but it raises your purchase budget and lowers your loan-to-value ratio. Lenders mortgage insurance usually applies above 80% LVR; the LMI calculator estimates it.
Use a mortgage broker
Lenders differ on expense benchmarks, income shading, card limit rates and floor rates, so the same application can produce different figures. A broker can check your scenario against several lenders' policies.
Understanding Your Borrowing Power in 2026
Your borrowing power is the maximum amount a lender is willing to lend you based on your financial situation. It is determined by a calculation that weighs your income, living expenses, existing debts, credit history, and the lender's own risk appetite. Understanding how this calculation works is essential for setting realistic property budgets and making informed financial decisions.
The Australian Prudential Regulation Authority (APRA) sets the prudential standards that banks and other authorised deposit-taking institutions follow. Under them, a lender tests whether you could afford repayments at least 3 percentage points above the loan rate, and APRA's 28 May 2026 statement kept the buffer at 3 percentage points. At 6.2%, the RBA's average rate on new owner-occupier variable loans, that means a test at 9.2%. The buffer is there so the loan stays affordable if rates rise.
Lenders do not cap repayments at a fixed share of gross income. They work out what is left each month: after-tax income, less living expenses (the higher of what you declare and a benchmark such as HEM), less existing repayments and an allowance for credit card limits. The largest loan whose repayment at the buffered rate fits in that surplus is your borrowing power. That is why a higher income, fewer dependants or lower card limits all lift it, and why the test rate, not the rate you will pay, sets the ceiling. APRA's debt-to-income limit sits on top, letting banks write up to 20% of new lending at six times income or more from February 2026.
Why Borrowing Power Varies Between Lenders
Not all lenders calculate borrowing power the same way. APRA's practice guide APG 223 says banks typically estimate living expenses with HEM or the Henderson Poverty Index, and expects them to use the greater of that benchmark and what you declare. Within that, lenders choose their own version of the benchmark, their own income shading and their own treatment of debts. Some count overtime, bonus or rental income at a lower share than others, and card limits at 3% or 3.8% of the limit a month.
Those choices move the result a long way. In this calculator alone, moving living costs from the high end of our HEM estimate to the low end takes a couple on $150,000 with two children from $659,000 to $766,000. This is one of the reasons working with a mortgage broker can help: they understand each lender's policies and can match you with the one that suits your situation.
For self-employed borrowers the calculation is more involved. Lenders generally assess self-employed income from recent tax returns, and some accept other documents such as BAS statements. This calculator treats all income you enter as salary, so self-employed applicants should expect a lender's figure to differ.
The Impact of Interest Rates on Borrowing Power
Interest rates feed straight into the test rate. In this calculator a single applicant on $100,000 with no debts has a lower figure of $513,000 at 6.2% (tested at 9.2%). At 7.2% that falls to $471,000, about 8% less; at 5.2% it rises to $562,000.
Rates can change over a 30-year loan, and the buffer is a test, not a forecast. Borrowing at your maximum leaves little margin for rate rises or a change in income, so compare the repayment at your actual rate with what you can comfortably set aside each month, not just with the surplus the lender calculates.
- Repayments are tested at the loan rate plus a buffer of at least 3 percentage points
- Living expenses are the higher of what you declare and a benchmark such as HEM
- Credit card limits count even with a zero balance, at 3% to 3.8% of the limit a month
- Lenders' policies differ, so their figures differ; this calculator shows a range for that reason
Frequently Asked Questions
Common questions about borrowing power and home loan serviceability.
How much can I borrow on a $100,000 salary?
How much can a couple on $150,000 borrow?
How do lenders calculate borrowing power?
What is HEM and how does it affect my borrowing power?
Why is my actual borrowing power different from the calculator result?
How can I increase my borrowing power?
Do credit cards affect borrowing power?
Does HECS/HELP debt affect borrowing power?
What is the serviceability buffer rate?
What is the debt-to-income limit of six?
Can a broker help me borrow more?
Is borrowing my maximum amount a good idea?
Does using this calculator affect my credit score?
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Important Disclaimer
Calculator results are estimates only and do not constitute a quote or offer of finance. Actual repayments will depend on your individual circumstances, credit assessment, and lender terms. Fees and charges may apply.
The information on this website is general in nature and does not take into account your personal objectives, financial situation, or needs. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a qualified professional.
Your Finance Guide works in conjunction with The Mortgage Group Pty Ltd trading as ALG Australian Lending Group (Australian Credit Licence 505575), Credit Representative (CR 392527) of Finance and Systems Technology Pty Ltd (ACN 092 660 912). Your Finance Guide is the publishing brand and is not licensed to provide credit assistance.
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